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Sunday, March 17th, 2024

Are You Using Your Home for your Retirement Income? – Ask a Vancouver Mortgage Broker

Are You Using Your Home for your Retirement Income

Vancouver mortgage brokerMany people who bought a home use to expect that they would pay off their mortgage before they retired and would apply that equity to fund their retirement.

Surprisingly, for many people, especially for those who are in the 50 plus age bracket, this is not going to materialize.

The Investor Education Fund recently conducted a survey of around 1,500 homeowners that suggests this is not the case. The survey revealed that 1 in 5 homeowners have no idea how much they’ve saved for their retirement. Almost 50% of those surveyed were of the opinion they will have used up their retirement savings in the first 10 years of their retirement.

One of the most notable results of the survey is that close to 40% in this age group are still making payments on their home as they get closer to retirement. Of this 40% who are still paying on their mortgage, only about 30% were of the opinion they would have their mortgage paid off when they retired.

 The reason why paying off a mortgage before retirement is important is that it can allow you to re-allocate your mortgage expense into a savings plan so you live more comfortably when you do retire. However, the recent levels of high debt and poor return on investments, along with weaker pension plans have put up additional road blocks to those approaching retirement.

Another problem foreseen in this survey is that close to 40% of those surveyed would noteven consider selling their home to use the proceeds of the sale as a retirement supplement. In fact, 60% of those surveyed said that remaining in their home was crucial in how they wished to maintain their lifestyle.

There are some strategies that can b employed by those who expect to have to continue making mortgage payments and use some of these alternative options as ways to use your home to your best advantage. These options include:

Selling your home regardless and use the money earned for a rental unit.

Selling a larger home and downsizing into a smaller sized home or a condo unit, and invest the difference. Alternatively, you could also move to a smaller community where it might be more affordable.

Obtain a home-equity line of credit. This approach should really only be used to pay for expenses and implies that you still have the ability to repay the loan later on.

Consider taking out a reverse mortgage. This allows you to borrow against the equity which you have built up in your home and only has to be re-paid when you sell your home later on or if you obtain the funds to re-pay it back.

Consider using part of your home for renters. It might not be the best option to invite strangers into your home but it is another way in which you could possibly generate some rental or additional income for your retirement.

Most of these options weren’t especially popular with those that were surveyed. The downsizing angle had the most appeal but this option doesn’t particularly allow good use to turn your home’s equity into any significant funds which you can use for yourretirement.

Selling and renting ranked second, while the third choice was the home equity line of credit followed by renting to strangers and the reverse mortgage option came in last.

There are ways to use your home to generate money for your retirement so maybe it’s time you gave it some thought.



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